7
19 Trillion or
19,000,000,000,000
http://www.nationaldebtclocks.org/debtclock/unitedstates
- We owe most of the money to ourselves.
- We owe a big chunk of the money — about $6 trillion — to the Federal government. So if there ever were a default (hopefully there won’t be) the government would also be stiffing itself.
- We owe about $5 trillion to other countries, including China.
- The total debt to China is only $1.3 trillion. So we’re not in hock to China as much as some people think we are.
- Yes, it’s a boatload of debt. But the experience of Japan, the U.S. after World War 2, and other countries, suggests that it’s a manageable amount as long as we eventually get our long-term entitlement spending under control.
Unit VII Part B: Managing the Economy
Discount Rates and Reserve Requirements
http://www.nationaldebtclocks.org/
The discount rate is the interest rate Reserve Banks charge
commercial banks for short-term loans.
Lower rates encourage lending and spending by
consumers and businesses.
Higher rates discourage lending and spending by
consumers and businesses.
Reserve requirements are the portions of deposits that
banks must hold in cash, either in their vaults or on deposit at a Reserve Bank.
A decrease in reserve requirements increases the funds
available in the banking system to lend to consumers and businesses.
An increase in reserve requirements reduces the funds
available in the banking system to lend to consumers and businesses.
American Government Standard 23 & 24
The federal government uses
spending and tax policy to maintain economic stability and foster economic growth. Regulatory actions carry economic costs and benefits.
The Federal Reserve System uses
monetary tools to regulate the nation’s money supply and moderate the effects of expansion and contraction in the economy.
Economic Indicators
Economic Indicators are information about how different
areas of economy are performing.
- Unemployment Rate: Number of Americans not
working but looking for work.
- Stock Indexes: Stock prices for various companies.
- Consumer Price Index: Average change over time for the
prices Americans pay for set goods.
- Existing Home Sales: Number of already built homes
sold each month.
- Consumer Confidence Index: Survey of 5,000
Americans to gauge how they feel about the economy.
When any of these indicators are varying wildey, the
government might want to step in and take action to change the economic conditions
Monetary Policy & The Federal Reserve
The Federal Reserve is responsible for all Monetary
Policy in the US. it is chaired by members appointed by the president and approved by the senate.
Federal Reserve System: Also called the Fed, the central
banking system of the US, operating independent of the US Government.
Monetary Policy: Controlling the supply of money and
credit.
The Fed has three tools to control the nation's monetary
policy:
Lower Discount Rate:
Buying government bonds.
Raising and lowering the Reserve Requirement:
Fiscal Policy
Federal Reserve Chair Janet Yellen
One of the ways the government can influence the
economy is through Fiscal Policy: the government's use of spending and taxation to influence the economy.
Different types of Fiscal Policy include...
Increase spending on projects.
Buying things (equipment, labor, land).
Reducing taxes.
There are problems with Fiscal Policy though...
President and Congress can be too slow to act.
Spending to help economy leads to national
debt.
Difficult to stop after economy recovers.